When it comes to personal finance the largest investment most people make is buying and owning a home.
Kind of goes without saying, right?
And the purpose for having homeowners insurance, apart from the fact that banks and mortgage lenders require us to have it, is to protect your investment from loss and liability.
The question is… how can you be sure you have enough coverage?
Tips for ensuring proper insurance coverage
The first point to keep in mind is that the cost of your policy (i.e. the premium) is based, in part, on the amount of coverage you have.
For example, your policy will outline coverage limits for damage, liability and medical expenses.
So it’s important to know what your coverage limits are, since some people end up with cheaper homeowners policies only after they cut their coverage limits.
As you can imagine, this is not necessarily a good idea.
Here are three tips for making sure you have the right coverage for your home:
- make sure you have replacement coverage
- check your deductible amount
- consider getting a free insurance review
As we pointed about above there are generally two parts to your homeowners policy.
One outlines the “hazard” insurance limits (i.e. damage, fire, etc.), while the other component outlines the limits for “liability.” As you probably figured out already, liability involves any “slip and falls” or other cases of injury when people visit your home and property.
Tip: Dogs, pools and trampolines are the single biggest risk factors for homeowners when it comes to liability coverage, affecting the cost of your policy.
What is replacement coverage?
When it comes to your hazard limits, make sure your policy is set up for replacement coverage.
Quite simply, this is the maximum dollar amount you would receive should your home become completely destroyed and need to be replaced.
The exact figure was calculated in advance, typically when you first purchased (or refinanced) your home. In fact, the reason you needed a real estate appraiser in the first place was to determine the value of your home, affecting both the loan amount to purchase and the coverage limit for the insurance company.
Well, if you’ve lived in your home more than a few years this dollar amount could be way off the mark.
For example, the cost to rebuild your home now – as opposed to several years ago – is most likely much higher. Building supplies and labor costs have both increased over the years.
Have you completed any renovations on your home?
Any improvements to your home, increasing its value, may be not reflected in your current policy if it hasn’t been updated.
Finally, the value of your home, despite the downturn in home values in 2008 and 2009, could still be much more than when you first purchased your home. Home prices are beginning to increase again. And if you purchased your home more than 10 years ago there’s a good chance that any appreciation of value is not reflected in your policy.
What’s your deductible?
A deductible is the amount you must pay after a loss (or damage) before your insurance company pays you even a single dollar.
You can think of it like a doctor visit “copay.”
So, if you have a claim for $1,000 worth of damage you would have to pay the deductible before your insurance company pays you for the remainder (if there is any remainder).
Tip: if you file a claim for damage for that is less than your deductible… don’t. You’ll have to pay to repair ALL of the damage anyway, and your insurance company will count this as a “claim” against you, even it they didn’t pay you a single penny. As you can image, any claims history will affect your future premium cost.
Now, most homeowners tend to have a $500 deductible.
However, by changing the deductible amount you affect your overall premium. The lower the deductible the higher your premium cost, and vice versa.
For some people it may make financial sense to increase your deductible amount, since it can significantly reduce your premium costs. And by following the tip above and handling any damage costs on your own that are below your deductible amount you end up filing fewer claims, saving on any future premium increases.
Does that make sense?
Get a homeowner insurance review
Finally, it makes sense to get a homeowners insurance review from an independent agent.
For example, after another rate increase from a large insurance company I finally called a local agent to review my coverage amounts and policy premium options.
He found that I had the right coverage in place, though there were a few discrepancies with the policy that needed to be corrected. He asked if I had filed any claims (because of rate increases in 2 of the previous 5 years), and then proceeded to save me more than $700 off my annual premium.
Needless to say I was thrilled.
The bottom line?
It makes sense to have a knowledgeable insurance agent periodically review your policy to make sure you have the right insurance coverage in place. And you just might find that there’s an opportunity to save a few dollars at the same time.
Get your free no-obligation quotes today
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Save time and aggravation with a free, customized, quote comparison from qualified insurance providers. It only takes a few minutes so why not enjoy peace of mind while getting the coverage you need.
Get your FREE, no-obligation homeowners insurance quotes today.
Or you can search through our list of homeowners insurance providers for your State or Metro area that can help you get the insurance coverage you need.
Either way the choice is yours…